Dry weather drags Mercury net profit down $21 million

Mercury NZ trimmed its full-year earnings guidance by $10 million

Mercury

Mercury said below-average power generation due to dry weather in the Waikato, and lost earnings arising from its 2019 sale of metering business Metrix, drove its operating earnings down by 15 per cent in the first half to December 31.

The company also revised its operating earnings forecast for 2020 down by $10 million due to drier conditions.

Chief executive Fraser Whineray said earnings before interest, tax, depreciation, amortisation and financial instruments (EBITDAF) came to $258m for the half, down from $302m in the previous corresponding period.

Mercury's net profit came to $83m, down from $104m a year earlier.

Whineray said that the result, when adjusted for lower generation and the sale Metrix, reflected "strong execution" across Mercury's business.

Mercury sold Metrix early in 2019 to intelliHUB Group for $270m.

At the time, Mercury said the annualised reduction to EBITDAF from the sale was forecast to be $28m.

Generation during the period fell by 3,428GWh due to drier conditions in the Waikato and important scheduled maintenance on several geothermal stations as part of Mercury's long-term asset management plan.

Despite the fall in earnings, Mercury announced an interim dividend of 6.4 cents per share, an increase of 3.2 per cent.

Mercury said it was now looking at EBITDAF for the year of $500m from an earlier forecast of $510m.

"This reflects an expected 170 GWh decrease in full-year generation to 3,900 GWh due to dry weather conditions in the Taupo catchment in H2-FY2020 to date," it said.

It was Whineray's last interim result at Mercury before he heads to Fonterra to take up an executive position there.

Mercury has appointed former Trustpower chief executive Vince Hawksworth to succeed him.

The company's full-year dividend guidance remains at 15.8 cents per share, fully imputed, representing a 2 per cent increase on 2019.

Whineray said Mercury expects to see ongoing challenging wholesale conditions due to national thermal fuel and transmission constraints, but the said the company's portfolio was well positioned.

"Intense competition in retail and strained retail margins will continue to be a feature," he said.